A Brief Guide To Age Eligibility For Applying For A Loan
Blog: NASSCOM Official Blog
Whether you are an ambitious business seeking funds to cover expenditures and boost growth or someone eager to start your own thing, loans can provide you with the necessary financial assistance.
A business loan can be availed with or without security, depending on the bank that offers loan and then the amount of risk they are willing to take. Several banks in India offer a loan for both small and big businesses. If you meet the eligibility criteria and possess all the necessary documents, getting approval and money is possible within a matter of days.
Eligibility criteria
For those looking to venture into a new business, a clear-cut business plan is essential to convince the banks that your business has the capability of repayment.
To be eligible for a business loan in India, a number of factors are considered. Every bank that offers loan will look into many criteria prior to sanctioning it. Some important ones are:
- Age: The applicant should be at least 21 years at the time of applying for the loan, and should be no older than 65 years at the time of loan maturity. When it comes to business age, most banks and online lenders also require a minimum age from borrowers. In most cases, this requirement can range from six months to two years.
- Turnover: A steady and healthy stream of cash shows lenders that you’re capable of sustaining the loan payments. It’s essentially a representation of your business’s health. Net income of the concern should be more than ₹150,000 per annum for a business loan up to ₹1,500,000 and over ₹300,000 for business loan above ₹1,500,000.
- Debt to income ratio: Most lenders require a debt-to-income ratio of 50% or lower. Small business lenders tend to be wary about lending to borrowers who already have other loans. In order to sustain a business, it is necessary to create fail-proof payment plans and avoid high-interest rates.
Documents Required for Applying for a Business Loan
Some basic of the documents needed to apply for a Business Loan are:
- Identity Proof like Passport, Driving License, PAN card, Voter’s ID, etc.
- 2 passport size Photographs
- Address proof like trade license, electricity bill, ration card, etc.
Banks and other traditional lenders can also ask for financial and legal documents for the application process. It is important to keep these ready while applying for a loan:
- Personal and business income tax returns and salary slips
- Balance sheet and income statements from the bank for the last 6 months
- Bank verified signature, PAN Card, Passport
- Business licenses
- Cancelled/scanned cheque, copy of passbook’s front page of the same bank account
Business loans you should know about
Business loans can be categorized into various types based on the application of funds. Types of business loan that you could borrow into, differ based on the application of the loan.
- Working Capital Loan:
Working capital is the money you need to meet your day-to-day business expenses and operational costs. This loan is against collateral and has a lesser rate of interest than overdrafts. In a working capital loan, the bank sets a limit for the business to take a loan and the amount can be utilized for the sole purpose which is to provide the working capital and cannot be utilized in any other manner.
The loans are offered typically for a 12-month tenure and have an interest rate of 12% to 16%. Banks can regularly audit the financial health of your business.
- Overdraft facility
Overdraft loans are usually based on some collateral or securities especially in terms of Bank Fixed Deposits. Depending upon the credit history, cash flows, and the repayment history of the business or individual promoter, the bank awards overdraft over a predetermined limit. This limit can be different for each borrower. Interest is charged by the bank only on the utilized amount.
Overdraft has no minimum monthly repayment however the amount you owe should be in the overdraft limit.
Our government recently announced that the overdraft facility will be doubled from ₹ 5,000 to ₹ 10,000 under the Pradhan Mantri Jan Dhan Yojana for the Jan Dhan accounts.
- Term Loan
These loans are used to buy fixed assets like machinery, land or buildings. The entire amount in a term loan is disbursed and is EMIs based for a specific predefined tenure. Typically, these loans are secured with a tenure of 2-10 years with repayment due monthly or quarterly. The interest could be either fixed or floating.
Government Schemes to consider
- The Credit Guarantee Fund Scheme (CGS)
The credit guarantee fund scheme is run by the government of India in collaboration with SIDBI (Small Industries Development Bank of India) for small and micro-level enterprises. It provides unsecured loans and allows you to borrow up to Rs.100 Lakh in loans as per your eligibility.
This loan can be availed by both new and existing Micro, Small and Medium Enterprises that are involved in service or manufacturing activities but excludes educational institutions, retail trade, Self Help Groups (SHGs), etc.
- MSME government business loan scheme
One of the hottest business schemes at present is the ‘MSME Business Loans in 59 Minutes’, a scheme first announced in September 2018 essentially as a working capital loan.
Both new and existing businesses can utilize the scheme to seek funds up to ₹ 1 crore. The approval for the loan can be granted within the first 59 minutes of application. With GST and Income Tax verifications, the documents previously mentioned in this article, and KYC details, you can apply for the loan.
Apart from the government-backed schemes, there are a number of private sector banks as well that offer MSME loan at competitive interest rates.
- The MUDRA business loan Scheme
MUDRA stands for Micro Units Development and Refinance Agency Ltd. These are financed through public and private sector banks, co-operative societies, scheduled commercial banks, and rural banks. It helps provide financial support to start-ups and small businesses with low-cost credit. There are three subheads under MUDRA scheme:
Sishu Loans up to Rs.50,000
Kishor Loans up to Rs.5,00,000
Tarun Loans up to Rs.10,00,000
Where banks are taking ages to approve or decline your business loan, Indifi offers you a smooth way out and fulfills your dreams with its online lending platform. Due to the support of technology, Indifi follows quick loan application and approval process!
Indifi believes in helping small businesses grow by offering loans to those that have potential and intent. We gather and analyse data of businesses from various sources and draw insights to arrive at their creditworthiness, based on their past and current performance in the context of the industry they are operating in.
Indifi takes the relevant applications to multiple lenders, thereby increasing the chances to secure a loan and create choice for lenders to pick the ones they wish to back.
The approach makes the loan process smart by minimizing risk, reducing paperwork and associated costs while providing a simple and hassle-free experience setting the businesses on the path to growth.
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